The UK-US Financial Regulatory Working Group is looking to broaden regulations involving virtual assets, particularly cryptocurrency and the possibility of launching CBDCs. This was one of the central themes of the latest meeting of the group, which also discussed international and bilateral cooperation, benchmark transition, financial innovation, sustainable finance, non-bank financial intermediation, operational resilience and cross-border regimes.
On cryptocurrency, the group’s discussion highlighted the recent market developments, especially the stablecoin situation. According to the latest joint statement of the UK-U.S. Financial Regulatory Working Group: ‘All participants committed to continued cooperation to support safe financial innovation, as well as to strengthen regulatory outcomes for stablecoins across jurisdictions.’
The UK-US financial regulators recognised the need for broader crypto-asset regulatory initiatives and is looking to explore and strengthen central bank digital currencies (CBDCs) in the jurisdictions. CBDCs are banks for digital currencies (similar to cryptocurrencies), pegged at the country’s fiat currency and issued and regulated by a national monetary authority. The financial innovation has, more or less, the same design as cryptocurrency minus the need for blockchain technology, which primarily prevents crypto transaction tampering.
Only the following countries have launched CBDCs as of early August 2022:
- The Bahamas
- Saint Kitts and Nevis
- Antigua and Barbuda
- Saint Lucia
- Saint Vincent and Grenadines
Last June, the participants had shared updates on the CBDC policy research and crypto-asset regulatory framework initiatives. Earlier this year, the US Fed released a study on the possible implementation of CBDC in the country. It explained that while CBDC eliminates the use of fiat, the system must comply with anti-money laundering and counter terrorist financing laws, which would mean CDD and KYC checks.
The Working Group said it will continue the ongoing partnership between the two countries for multilateral discussions on financial innovations like the broader crypto market. Senior officials from the HM Treasury, Bank of England, the Financial Conduct Authority, the U.S. Treasury Department, the Federal Reserve Board, the Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation (FDIC), the Office of Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC) are part of the Group.
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